It's not just a one-bourse race

By David Potts

There's no shortage of tipsters when it comes to the greatest race of them all. David Potts sizes up the form.

Good luck on Tuesday, although the chances are you've chosen the wrong race for a punt.

Backing the winner of the Melbourne Cup is about a one-in-25 chance, give or take a few scratchings. That's still better than Lotto, which is one-in-four-million - where for all intents and purposes you've got the same chance of winning as not buying a ticket at all.

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But then you know that already, don't you?

Frankly, the best hope you have of Lotto making you a millionaire is by not buying a ticket and instead putting the money you've saved in the bank.

At least if you punt on a share you're either right or wrong - the same odds as that other diversion on Tuesday, the US presidential election.

Still, I take the point that the Cup has better odds than a share if you pick the right one and you can at least pretty well rule out every single horse fainting at the barrier.

But extend what advisers call your "wealth creation horizon" from three minutes to three months - or preferably three years - and you'd be surprised what opportunities are around.

Which calls for an alternative Melbourne Cup form for investors.

SHARES

The sharemarket has lots of tipsheets and, just like the Cup form guides, they're all saying something different, although one stock that always gets a tick is BHP Billiton.

The biggest of the tipsters is Fat Prophets, which as a rule prefers resource stocks over banks - a somewhat academic difference at the moment.

Head of research Greg Canavan is putting his money on the transport group Toll Holdings.

"We like its Asian trade routes," Canavan says.

Last year Toll shunted its Patrick port assets and rail company Pacific National into Asciano and had the good sense to freight most of its debt to the same place.

With its resources bent, naturally there's also BHP Billiton.

"You can't go past it because it's trading at only three or four times earnings," Canavan says, though he concedes it might still have further to fall, which isn't so much a scratching as a false start. Or perhaps a false finish.

Anyway, Fat Prophets warns the market could drop to about 3500 points, which could happen before I finish writing this but is likely, at last, to be the bottom.

"It's really extraordinarily good value. It's the volatility that's keeping people out," Canavan says, adding that at some point the cheap dollar will drag foreign investors back in.

For longer odds, try Catalpa, which used to be Westonia.

"[It has] a fair bit of gold that needs a price of $1000 an ounce (it's already well above that) and it has new management that's much more likely to get the stuff out of the ground," Canavan says.

Trading at about three cents a share, there can't be much of a downside, though it will need to raise capital at some point to dig it out.

The Intelligent Investor likes the Lowys' shopping-centre stock, Westfield, on the basis that fortune favours it more than its rivals.

"All this financial turmoil will create more opportunities for it so it will get even bigger," managing director Steve Johnson says.

"It's in the fortunate position where everyone else is unfortunate. And it's not just luck on Westfield's part either."

For a place, he also likes the former high-flying fund manager, Platinum Asset Management, which specialises in offshore stocks.

"It has $90 million in cash, is completely debt free and doing well in a difficult market," he says.

For a punt, choose between Australian Worldwide Exploration, Tap Oil and Roc Oil.

Better still choose all three. "If one drops the other two could still make you money," he says.

They're all priced as if oil were below $US10 a barrel, which you will have noticed isn't the case, but then they do have to get it out of the ground.

The Rivkin Report's Shannon Rivkin also backs BHP Billiton but likes Macquarie Airports for a place.

"[It has] a lot of cash because it sold assets at the top of the market," Rivkin says. "Its asset backing is twice its current price and the oil price is falling, which will boost air travel."

He doesn't like small, speculative stocks but says Solomon Lew's Premier Investments is a good bet.

At wise-owl.com.au the tip is an unlikely one: the National Australia Bank - the bank hit hardest by the subprime fallout.

But then it's also the only one that's cleared its deck, says senior equities analyst Simon Guzowski.

"It's a positive that these are the guys who've come down because there's less chance of surprises. It's also been discounted further and is cheaper than its peers," he says. He warns, however, that it won't be immune from the slowing economy.

For a punt, NZ Oil & Gas and Otto Energy seem cheap with little risk.

Still, why back one horse when you could back the entire race? Index and exchange-traded funds will give exposure to the whole market, or any bits of it you want, for a fraction of the risk of picking just a few stocks.

PROPERTY

In all this financial turmoil, property's form isn't as promising as might first appear. There's no more buying off the plan as a surefire bet. And truth be told, it's hard to tell exactly where the property market is at the moment.

With the prices of every other asset falling as a recession looms and jobs are threatened, there's no way real estate can escape unscathed.

True, the increase in the first home buyer grant should put a floor under prices at the lower end of the market but that's not exactly what you'd call a boom.

"The trend is a medium-term slide in prices," independent property consultant John Wakefield warns.

He says to look for cold, as in under-valued, not hot, as in over-priced, property spots.

Certainly there are anomalies out there. A house in Vaucluse without a water view is cheaper than in Bondi.

Other examples are Artarmon and Chatswood, as well as Campsie.

"Small local developers will start to mop these up," Wakefield says.

If you're really keen, City of Canterbury Council will even let you sub-divide properties of only 600 square metres.

The top prospects tipped by Joseph Chou, who has a $20 million real-estate portfolio and owns property investment group Ironfish, are Kingsford (close to facilities, beach and city with limited supply of land available for development) and Rhodes (excellent public transport, close to Olympic Park and host to new Commonwealth Bank headquarters) in Sydney, Docklands (after a slow start, demand is outstripping supply) in Melbourne as well as Hamilton ("the Mosman of Brisbane") and Tugun on the Gold Coast.

Property research group RP Data says units in inner Sydney are a good bet, even if that's thanks to their poor performance over the past five years.

"The gap between property values in Sydney compared with the other capital cities has closed significantly when analysed against historical value differentials," research analyst Cameron Kusher says.

"It appears that after five years in the doldrums, the worst of the value declines is over and by mid to late 2009 the Sydney property market should start to make a recovery."

HYBRIDS

These securities are a halfway house between the volatility of the sharemarket and the flat returns of the property market.

These come under all sorts of contrived names, usually with reset and preference shares in there somewhere. In reality they're corporate bonds that trade like shares - if without quite the same price extremes, although still enough to keep you on the edge of your seat - and pay generous interest in most cases carefully disguised as a fully franked dividend.

They're safer than shares but not by much. Their drawbacks are there's sometimes a vagueness about what happens at maturity and there's no guarantee the dividend will be paid.

Most issues - tellingly including the banks - are non-cumulative, which means if they miss a payment, too bad. They're under no obligation to make good later.

Still, their prices have been savaged by the sharemarket so "there's a bargain every way you go", as far as Tony Lewis of bond dealers Lewis Securities is concerned.

Some hybrids such as Great Southern Plantations have "triple-figure returns" with nothing wrong with the underlying business, he says.

The price of PaperlinX hybrids has been trashed, for example, even though it just raised $150 million in new equity.

But the smart money is looking more for a quinella than just one win. "Take a portfolio approach and spread hybrids as widely as you can," Lewis says. "Don't just pick one. If you have $5000 to invest, buy two or three. If you have $100,000 buy 10."

COLLECTABLES

The dollar might not be worth much but rare coins are a completely different matter.

Unlike shares or property, it's almost impossible for the price of a rare coin to fall.

Still, that's because the price may not have moved for years, though more recently prices have been soaring.

The doyen of numismatists, Bob Roberts of Sydney's Wynyard Coin Centre, has got his hands on one of Australia's rarest coins - the 1813 "dump", which he's prepared to offload for $115,000.

It has a flaw, which in the world of rare coins, stamps and banknotes is a badge of honour.

I have to say there's something endearing about an asset where somebody's boo-boo is not only forgiven but celebrated.

Just think, if that principle were applied in the sharemarket then ... oh, sorry where was I?

Ah yes, Roberts estimates the off-centre dump would be worth something like $7 million if it were a similarly rare US coin.

But then it's not. And he's selling it.

"I've been collecting for 70 years and it's the only known one," he says, which sounds like a one-way bet if ever there was one.

Pre-decimal Australian banknotes with asterisks after their number are also doing well in the current market.

The trouble with taking a punt on good collectables is the best ones are difficult to get. That's why they're valuable. And that's also why they're expensive.

"Waiting for something to come on to the market can be a problem," says top-end coin dealer Belinda Downie of Coinworks, who last week sold a square penny for $140,000.

"The same is happening in art - the truly rare, high quality pieces are selling well," she says. "But this market is really hard to predict."

CASH

Cash is king, though the kingdom is slowly shrinking.

Falling interest rates, inflation running at 5 per cent and tax all take their toll.

Betting on rates falling, however, has its possibilities.

This suggests parking your money in a bank term deposit, which is government guaranteed, or even in government bonds.

Unfortunately there's a trade-off between rate and term since the banks aren't silly.

You can get top rates for a term of a few months such as the National's UBank paying 8 per cent for three months - an offer that will close on Friday. But for the longer terms of three, four or five years, the pickings aren't quite so good.

The safest thing to do is spread your money over a mix of maturities.

And don't even think about fixed-interest funds.

Some, such as the AMP Capital Enhanced High Yield Fund, have frozen redemptions for 12 months.

You don't want to be putting money in when others can't get theirs out.